Bad investment deal: Tunnels to Egypt

A Hamas public relations problem: No transparency and a failure to regulate. Sound familiar?

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October 7, 2009 6:27PM (UTC)

I'm beginning to wonder whether Bloomberg is purposefully constructing news headlines to be almost completely incomprehensible because their Web analysts have determined that traffic is boosted by readers clicking through simply to understand what the hell the story is about. Works for me, because I couldn't resist "Hamas Finds Gaza Tunnels' $500 Million Loss Worse Than Madoff."

What we have here appears to be another failure to properly regulate.

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According to Bloomberg's Jonathan Ferziger, some 4000 Gazans invested "as much as $500 million" to help construct a network of tunnels used to smuggle goods from Egypt. But Israel destroyed the tunnels last winter and the investors lost all their money. "Hamas is offering a partial repayment of 16.5 cents on the dollar using money recovered from Ihab al-Kurd, the biggest tunnel operator," reports Ferziger, but that doesn't appear to be enough.

Money quote:

"There is no transparency, no public records, no regulators, none of the mechanisms that would let you trace what happened to all the money that people invested in the tunnels," said Samir Abdullah, the Palestinian Authority's former planning minister. "The smugglers provide essential revenue for Hamas."

Ferziger's analysis:

The imbroglio over the 800 to 1,000 tunnels has deepened Hamas's decline in public opinion in Gaza and highlights the Wild West nature of the underground economy that supports this jammed enclave of 1.4 million people.